Magazine article American Banker

Turnaround Wins Walters Star Billing at Northeast

Magazine article American Banker

Turnaround Wins Walters Star Billing at Northeast

Article excerpt

Turnaround Wins Walters Star Billing at Northeast

As chief financial officer of Northeast Savings, Kirk W. Walters succeeded where many have failed. He shrank the balance sheet of a thrift that seemed headed for extinction, restoring profitability while keeping capital on an even keel.

His creativity and good timing helped elevate him this month to the No. 2 post at the $4 billion-asset institution in Hartford, Conn.

"His financial acumen has been invaluable in returning this company to profitability, and will continue to [stand] our shareholders in good stead in the future," chairman George P. Rutland said in announcing Mr. Walters' appointment as president and chief operating officer.

Holdings Included Junk Bonds

Two years ago, Mr. Walters said, the company was in "a very difficult position." The thrift was burdened with junk bonds and other nontraditional assets funded with high-cost borrowings from a Home Loan bank. Northeast was making only 60 basis points more on earning assets than it was paying for money.

Now that spread has widened to 178 basis points, even as the surrounding economy has collapsed, and Northeast has enjoyed five consecutive quarters of profits.

As chief financial officer, Mr. Walters executed Mr. Rutland's strategy of shrinking the balance sheet by half and transforming a specialist in wholesale mortgage banking and junk bonds back into a traditional retail thrift.

Mr. Walters "showed ingenuity" in moving two issues of the thrift's preferred stock to its holding company, said Henry Peltz, a former thrift analyst for Keefe, Bruyette & Woods Inc. who now is a vice president of the financial institutions advisory division at Nationar Inc.

The maneuver enabled the thrift to add $100 million to capital, Mr. Peltz pointed out. Mr. Walters downplayed this, however, saying he merely did what commercial bankers had been doing for some time. …

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